August saw more setbacks for the decentralised finance (DeFi) ecosystem as on-chain economic activity decreased. A VanEck research shows that exchange volume decreased to $52.8 billion in August, which is 15.5% less than in July.
The research is based on VanEck’s MarketVector Decentralised Finance Leaders Index (MVDFLE), which monitors the performance of the biggest and most liquid tokens on DeFi protocols, such as Unisawp Uni , Lido DAO LDO, Maker MKR , Aave AAVE, THORChain RUNE, and Curve DAO (CRV).
According to the research, the DeFi index underperformed Bitcoin BTC tickers down and Ether ETH tickers down in August, declining 21% for the month. The results were made worse by the 33.5% negative performance of the UNI token, which investors sold in order to realise gains from July.
Total value locked (TVL), a crucial ecosystem indicator, fell 8% in August, from $40.8 billion to $37.5 billion, outpacing Ethereum’s 10% monthly decrease.
The report contends that despite August’s low performance for DeFi coins, the ecosystem experienced growth all during the month. These changes include Maker and Curve’s stablecoin growth as well as Uniswap Labs’ decision to dismiss a class-action lawsuit.
Curve Finance’s stablecoin crvUSD experienced substantial growth in August after recovering from a big exploit in late July, reaching a new all-time high of $114 million borrowed. CrvUSD is based on a collateralized debt position (CDP) basis and is pegged to the US dollar. In other words, customers deposit security, like ETH, to borrow crvUSD.
“The growth of crvUSD has allowed it to become a significant contributor of revenue for the platform, with crvUSD fees exceeding fees collected from all non-mainnet liquidity pools in 3 of the 4 last weeks,” according to the report. The governance token from Curve Finance, however, has not yet showed encouraging signs of recovery since the exploit, with a 24% price drop to $0.45 in August.
VanEck analysis notes about CRV token performance:
“Due to the price decline, investors who bought CRV OTC from Michael Egorov last month are now only 12.5% above the water on their investment, with 5 months left until they can sell. If crvUSD can continue to grow to the point that it offsets the drop in exchange revenue caused by decreasing DeFi volume, CRV price may see some relief. Still, until then, declining DeFi volume remains a solid headwind for CRV appreciation.“
Michael Egorov, the founder of Curve Finance, had loans totaling about $100 million that were secured by 47% of the circulating quantity of CRV, the protocol’s native token. Following the attack, the CRV price fell by about 30%, and worries about Egorov’s collateralized loan liquidation spread throughout the DeFi ecosystem. During the crisis, Egorov sold 39.25 million CRV tokens to a number of illustrious DeFi investors in an effort to pay down his debt.
VanEck also noted that stablecoins are still under pressure due to the present levels of interest rates around the world, particularly in the US. Stablecoins’ total market value decreased 2% in August to $119.5 billion. The firm claimed that this was primarily due to the high interest rates in traditional finance, which encouraged investors to sell their stablecoins and switch to money market funds instead, where they could earn a 5% risk-free dividend.